Conformed Copy - L3115 - Forestry Development Project - Loan Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3115 ME (Forestry Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NACIONAL FINANCIERA, S.N.C. Dated September 25, 1989 LOAN NUMBER 3115 ME LOAN AGREEMENT AGREEMENT, dated September 25, 1989 between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NACIONAL FINANCIERA, S.N.C. (the Borrower). WHEREAS (A) the United Mexican States (the Guarantor) and the Borrower, having been satisfied as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, have requested the Bank to assist in the financing of the Project; (B) by an agreement (the Guarantee Agreement) of even date herewith between the Guarantor and the Bank, the Guarantor has agreed to guarantee the obligations of the Borrower in respect of the Loan and to undertake such other obligations as set forth in the Guarantee Agreement; (C) by the Banxico Project Agreement of even date herewith, between the Bank and Banco de Mexico (Banxico), the latter has Page 2 agreed to undertake the obligations set forth in the Banxico Project Agreement; and (D) by the Banrural Project Agreement of even date herewith, between the Bank and Banco Nacional de Credito Rural (Banrural), the latter has agreed to undertake the obligations set forth in the Banrural Project Agreement; and WHEREAS the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Loan and Guarantee Agreements" of the Bank, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement; (b) "Banxico" means Banco de Mexico, acting as trustee for FIRA (hereinafter defined); (c) "Banrural" means Banco Nacional de Credito Rural, acting as trustee for FICART (herein defined); (d) "FONDO Trust Agreement" means the Contrato de Fideicomiso dated June 24, 1955, between the Guarantor and Banxico whereby the Fondo de Garantia y Fomento para la Agricultura, Ganaderia y Avicultura (FONDO) was entrusted to Banxico, as trustee; (e) "FEFA Trust Agreement" means the Contrato de Fideicomiso dated August 26, 1965, between the Guarantor and Banxico whereby the Fondo Especial para Financiamientos Agropecuarios (FEFA) was entrusted to Banxico, as trustee; (f) "FEGA Trust Agreement" means the Contrato de Fideicomiso dated October 30, 1972 between the Guarantor and Banxico, whereby the Fondo Especial de Asistencia Tecnica y Garantia para Creditos Agropecuarios (FEGA) was entrusted to Banxico, as trustee; (g) "FIRA" means collectively FONDO, FEFA and FEGA, and the technical and administrative organization, resources, staff and facilities used, or to be used, by Banxico to operate, as trustee, FONDO, FEFA and FEGA; (h) "FICART" means the Fideicomiso para Credito en Areas de Riego y Temporal which was entrusted to Banrural as trustee under the Contrato de Fideicomiso (FICART Trust Agreement) dated February 11, 1970, entered into between the Guarantor and Banrural, as amended on June 4, 1981, and the term includes the technical and administrative organization, resources, staff and facilities used, or to be used, by Banrural to operate FICART as trustee; (i) "Banxico Project Agreement" means the agreement between the Bank and Banxico of even date herewith as such agreement may be amended from time to time; Page 3 (j) "Banrural Project Agreement" means the Agreement between the Bank and Banrural of even date herewith, as such agreement may be amended from time to time; (k) "Project Agreements" means collectively the Banxico and Banrural Project Agreements; (l) "Eligible State" means the State of Durango or the State of Chihuahua in the territory of the Guarantor and collectively referred to as "Eligible States"; (m) "Project Area" means the areas within the Eligible States mainly covered with pine and oak forests and located in the Sierra Madre mountain range; (n) "Participating Bank" means any credit institution organized and authorized to do business under the laws and in the territory of the Guarantor eligible to participate in the carrying out of the Project as a financial intermediary; (o) "Beneficiary" means any forest producer (i.e., ejido, community, cooperative or private forest landowner) or any small private sawmill owner in the Eligible States (collectively referred to as Beneficiaries) having juridical capacity under the laws of the Guarantor to enter into contractual arrangements, who are predominantly engaged in forestry activities and to which a Participating Bank proposes to make or has made a Sub-loan (hereinafter defined); (p) "Sub-loan" means a loan made, or proposed to be made, by a Participating Bank to a Beneficiary for a Sub-project (hereinafter defined) pursuant to the provisions of the Project Agreements, and to be partially financed out of the proceeds of the Loan; "Medium- and Long-term Sub-Loan" means a Sub-loan made, or proposed to be made, under the terms and conditions specified in Part I of each of the Schedules to the Project Agreements; "Short-term Sub-loan" means a Sub-loan made or proposed to be made, under the terms and conditions specified in Part II of the Schedules to the Project Agreements; (q) "Sub-project" means a project carried out or to be carried out by a Beneficiary including one or more of the following: (i) investment in traditional logging equipment for small forest producers including, inter alia, chainsaws, truck mounted cable winches and log trucks; (ii) investment in advanced logging equipment for medium forest producers, including inter alia, chainsaws, skidders, hydraulic loaders, tractors and trucks; (iii) investments for the establishment of sawmills and other mechanical forest industries for the vertical integration of forest producers' activities in the Project Area, or for the modernization of existing sawmills; (iv) investment in road maintenance equipment for the producer/industry cooperatives, including, inter alia, road graders, bulldozers and dump trucks; and (v) provision of incremental working capital to support the carrying out of the Beneficiary's activities; (r) "FIRA Lending Policies and Operating Manual" means the Manual de Operacion of FIRA as of the date of this Agreement; (s) "FICART Lending Policies and Operating Manual" means the Manual de Operacion of FICART as of the date of this Agreement; (t) "General Interest Rate Agreement" means the General Agreement on Interest Rates Applicable to Credit Operations of Fondos de Fomento financed by the International Bank for Reconstruction and Development, entered into between the Guarantor and the Bank, dated August 7, 1984, as amended; (u) "SARH" means the Secretariat of Agriculture and Hydraulic Resources (Secretaria de Agricultura y Recursos Hidraulicos) of the Guarantor; Page 4 (v) "SEDUE" means the Secretariat of Urban Development and Ecology (Secretaria de Desarrollo Urbano y Ecologia) of the Guarantor; (w) "Project Coordination Unit" means the units established by SARH at the federal level and in each Eligible State for the purpose of coordinating the monitoring of the Project and referred to in Section 3.04 of the Guarantee Agreement; (x) "PVP" means the Sistema de Pagos Variables al Valor Presente, a repayment system which permits the partial capitalization of interest in order to maintain the present value of combined repayments of principal and interest of the Sub-loan; (y) "UAFs" means Forestry Administration Units (Unidades de Administracion Forestal) which are the principal extension groups in the Eligible States; (z) "SCT" means Secretaria de Comunicaciones y Transportes (Secretariat of Communications and Transport) of the Guarantor; (aa) "INI" means the National Amerindian Institute (Instituto Nacional Indigenista), an agency of the Guarantor established by Presidential Decree of December 4, 1948 published in the Diario Oficial of the Guarantor of the same date; (bb) "SCT Convenio" means the Convenio, dated November 14, 1988 between SARH and SCT providing for the assistance by SCT in the implementation of the rehabilitation and improvement of forest roads under Part C of the Project; (cc) "SEDUE Carta de Compromiso" means the letter of commitment, dated May 31, 1989, between SARH and SEDUE providing for the implementation by SEDUE of the environmental protection and monitoring activities under Part F of the Project; (dd) "INI Carta de Compromiso" means the letter of commitment, dated May 30, 1989, between SARH and INI providing for the implementation by INI of the technical assistance, training and monitoring activities under Part G of the Project; (ee) "Fee Convenio" means the Convenio in the form submitted by the Guarantor to the Bank by letter dated September 1, 1988 and required to be entered into in such form by SARH with forest road users in the Project Area pursuant to Section 3.08 of the Guarantee Agreement providing, inter alia, for the payment by such users of a fee per cubic meter of wood or lumber transported over those forestry roads in their jurisdiction which are rehabilitated under Part C.1 of the Project; (ff) "Monitoring Program" means the program submitted by the Guarantor to the Bank by letter dated November 14, 1988 detailing the procedures and responsibilities for monitoring the progress of the Project; and (gg) "Plan of Work" means each of the detailed work schedules to be furnished to the Bank annually pursuant to Section 3.05 (i) of the Guarantee Agreement. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agree- ment, an amount in various currencies equivalent to forty-five million and five hundred thousand dollars ($45,500,000). Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from Page 5 time to time by agreement between the Bank and the Borrower for expenditures made or, if the Bank shall so agree, to be made in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan; and (b) The Borrower shall, for the purposes of the Project, open and maintain in dollars a special account on terms and condi- tions satisfactory to the Bank. Deposits into, and payments out of, the Special Account shall be made in accordance with the pro- visions of Schedule 5 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1996 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time at a rate per annum for each Interest Period equal to one- half of one percent per annum above the Cost of Qualified Borrowings for the last Semester ending prior to the commencement of such Interest Period; (b) As soon as practicable after the end of each Semester, the Bank shall notify the Guarantor and the Borrower of the Cost of Qualified Borrowings for such Semester; and (c) For purposes of this Section: (i) "Interest Period" means the six-month period commencing on each date specified in Section 2.06 of this Agreement, including the Interest Period in which this Agreement is signed; (ii) "Cost of Qualified Borrowings" means the cost of the outstanding borrowings of the Bank drawn down after June 30, 1982, expressed as a percentage per annum, as reasonably determined by the Bank; and (iii) "Semester" means the first six months or the second six months of a calendar year. Section 2.06. Interest and other charges shall be payable semiannually on April 15 and October 15 in each year. Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. ARTICLE III Transfer of Loan Proceeds; Execution of the Project; Other Covenants Section 3.01. (a) The Borrower shall enter into contractual arrangements, satisfactory to the Bank, with the Guarantor providing for, inter alia: (i) the transfer to the Guarantor of the proceeds of the Loan; (ii) the transfer by the Guarantor to Banxico of such portion of the proceeds of the Loan as shall be required by FIRA for purposes of carrying out Part A of the Project; (iii) the transfer by the Guarantor to Banrural of such portion of the proceeds of the Loan as shall be required by FICART for purposes of carrying out Part B, of the Project; and (iv) the transfer by the Guarantor to the Borrower of such funds which the Borrower shall be required to pay to the Bank on account of principal, interest, and other charges on the Loan; and Page 6 (b) Except as the Bank shall otherwise agree, the Borrower shall not change or fail to enforce any provision of the contractual arrangements referred to in subparagraph (a) of this Section 3.01. Section 3.02. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to this Agree- ment. Section 3.03. The Bank and the Borrower hereby agree that the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) shall be carried out: in respect of Part A of the Project by Banxico, pursuant to Section 2.05 (a) of the Banxico Project Agreement; in respect of Part B of the Project by Banrural, pursuant to Section 2.05 (a) of the Banrural Project Agreement; in respect of Parts C, D, E, F and G of the Project by the Guarantor pursuant to Section 3.02 of the Guarantee Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) The Borrower shall maintain, or cause to be maintained, the Special Account, and separate records and accounts adequate to reflect, in accordance with sound accounting prac- tices, the resources and expenditures in connection with the execution of the Project. (b) The Borrower shall: (i) have such separate records and the Special Account for each fiscal year audited, in accordance with generally acceptable auditing, standards and practices consistently applied, by independent and qualified auditors; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; (iii) furnish to the Bank each month certified statements of the Special Account; and (iv) furnish to the Bank such other information concerning the Special Account, and the audit thereof, and said records as the Bank shall from time to time reasonably request. ARTICLE V Remedies of the Bank Section 5.01. Pursuant to Section 6.02 (k) of the General Conditions, the following additional events are specified: (a) Banxico shall have failed to perform any of its obliga- tions under the Banxico Project Agreement; (b) Banrural shall have failed to perform any of its obligations under the Banrural Project Agreement; (c) a change shall have been made in the FONDO Trust Agree- ment, the FEFA Trust Agreement, the FEGA Trust Agreement, or the FICART Trust Agreement, which would materially and adversely Page 7 affect the carrying out of the Project; (d) a resolution shall have been passed for the dissolution or liquidation of FONDO, FEFA, FEGA or FICART; (e) a change shall have been made in either the FIRA or the FICART Lending Policies and Operating Manuals which would materially and adversely affect the carrying out of the Project; and (f) as a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that either Banxico or Banrural will be able to perform their respective obligations under the Banxico Project Agreement or the Banrural Project Agreement. Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified: (a) the events specified in paragraphs (a) or (b) of Section 5.01 of this Agreement shall have occurred and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower, the Guarantor, and when appropriate, to Banxico or Banrural; and (b) any event specified in paragraphs (c) or (d) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the contractual arrangements referred to in Section 3.01 (a) of this Agreement and Section 2.02 (a) of the Guarantee Agreement shall have been executed. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Bank: (a) that the Banxico Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Banxico, and is legally binding upon Banxico in accordance with its terms; (b) that the Banrural Project Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, Banrural, and is legally binding upon Banrural in accordance with its terms; (c) that the contractual arrangements referred to in Section 3.01 (a) of this Agreement and Section 2.02 (a) of the Guarantee Agreement have been duly executed and delivered on behalf of the parties thereto and are legally binding upon them in accordance with their respective terms; (d) that the Fee Convenio shall, upon execution and delivery by the parties thereto, be legally binding upon them in accordance with its terms; and (e) that the SCT Convenio, the SEDUE Carta de Compromiso and the INI Carta de Compromiso have been duly executed and delivered on behalf of the parties thereto and are legally binding upon them in accordance with their respective terms. Section 6.03. The date December 27, 1989 is hereby specified for the purposes of Section 12.04 of the General Conditions. Page 8 ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Director Internacional of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For the Borrower: Direccion Internacional Nacional Financiera, S.N.C. Plaza NAFINSA Insurgentes Sur 1971 Torre Sur 9